Elmer Wheeler is the greatest salesperson you’ve probably never heard of, though you probably have heard his most famous piece of advice: Don’t sell the steak, sell the sizzle.
The problem for software companies in today’s economy is that it doesn’t matter which one you sell—the traditional sales funnel no longer works effectively. That’s because, in a recurring revenue business model, selling comes with a high customer acquisition cost (CAC) that eats into customer lifetime value (CLV) and does nothing to increase net retention rate (NRR). If Mr. Wheeler was alive today, he’d have a different piece of advice: Let the steak sell itself.
In other words, adopt a product-led growth (PLG) model. PLG is a go-to-market strategy that transforms the way products are designed and delivered. This strategy puts the product at the forefront of the customer journey to drive conversion, adoption, retention, and expansion. By leveraging product usage data to deliver immersive product experiences at scale, PLG aligns products to customer needs. Aligned customers experience more value from the product and are much more likely to be retained and primed for expansion.
At Gainsight, we believe PLG is one of, if not the most important trends in the tech industry. That’s why we collaborated with RevOps to produce the Product-Led Growth Index 2022. We surveyed every level of management at over 600 companies across a wide range of company sizes, annual contract values, industry segments, and geographic locations. And the results were fascinating. We encourage you to download the report, but in the meantime, we wanted to share three key trends that you’ll want to put on your radar ASAP.
Almost All Companies Without Existing Product-Led Growth Models Will Invest This Year
This trend is about commitment. 57% of companies plan to implement PLG strategies this year. And 39% of companies are researching ways to implement PLG strategies. In terms of both investment and implementation, an overwhelming majority of companies are committed to PLG. It’s clear companies understand that in order to reach their revenue goals, the focus must be on ways to use the product to improve the customer experience. The
90% of Companies Can Increase Revenue by Involving Product in Upsell Opportunities
Companies are leaving upsell revenue on the table. Product is only responsible for upsell (growth) opportunities 10% of the time, with 29% being handled by Sales and 28% by Customer Success. That means that too many companies, despite having adopted PLG, are still repeating the mistakes of the old Sales-led model.
If Product isn’t driving the upsell process, it is likely a high-touch effort operating without crucial data regarding customer usage and sentiment. Instead, companies should leverage product analytics to uncover insights into how customers are using the product and what they might be missing out on. That leaves teams less dependent on qualitative feedback to understand their customer’s journey.
Product-Led Growth Metrics Tracking Is in Its Infancy
Metrics are an untapped resource. Despite the fact that PLG motion exists in 58% of companies, most companies are not effectively tracking PLG metrics. Only 17% of respondents reported tracking time-to-value (TTV), only 26% track activation rate, and only 24% track product-qualified leads (PQLs).
This lack of data collection indicates an opportunity for Product teams to sharpen their focus on buyer behavior to improve conversions. Metrics like time-to-value, free account sign-up, organic and inorganic acquisition channels, and lead-to-conversion are just a small fraction of the data that could be leveraged for better revenue growth.
Opportunity Is Knocking for PLG and Product Teams
The most exciting takeaway from the index is that there is still so much opportunity for PLG to drive durable growth for SaaS businesses. As businesses mature their PLG strategies, the result will be a stronger growth, a higher CLV, and lower CAC as the products truly begin to sell themselves.
You can read the full report here.